To read the full version of this content please select one of the options below:

Consumer demand for and effects of tax on sparkling and non-sparkling bottled water in the United States

Wen Zheng (Department of Agricultural Economics, Texas A&M University, College Station, Texas, USA)
Senarath Dharmasena (Department of Agricultural Economics, Texas A&M University, College Station, Texas, USA)
Oral Capps Jr (Department of Agricultural Economics, Texas A&M University, College Station, Texas, USA)
Ramkumar Janakiraman (Department of Marketing, Darla Moore School of Business, University of South Carolina, Columbia, South Carolina, USA)

Journal of Agribusiness in Developing and Emerging Economies

ISSN: 2044-0839

Article publication date: 3 September 2018

Downloads
255

Abstract

Purpose

The purpose of this paper is to investigate the factors affecting consumer demand for and the effects on tax on sparkling and non-sparkling bottled water in the USA.

Design/methodology/approach

Using nationally representative data from 62,092 households and tobit econometric procedure, conditional and unconditional factors affecting the demand for sparkling and non-sparkling bottled water were estimated.

Findings

The own-price elasticity of demand for sparkling and non-sparkling bottled water is −0.664 and −0.229, respectively. Coffee, fruit drinks, whole milk and tea are substitutes for non-sparking bottled water. Non-sparking bottled water, coffee, fruit drinks and whole milk are substitutes for sparking bottled water. Household income, race, region and presence of children significantly affect the demand for bottled water. A 10 percent increase in price due to a tax on bottled water decreased plastic use by 50 grams per household per year. This is equivalent to saving 9.5m pounds of plastic annually.

Research limitations/implications

Data used in this analysis only captured at-home consumption of bottled water by US households. While tax on bottled water may reduce the consumption of bottled water, it may increase the consumption of competitive beverages such as carbonated soft drinks or fruit drinks. Although the use of plastic with regards to water bottles may go down as a result of the tax, the plastic consumption could go up with regards to consumers’ increased purchase of other beverages. This might contribute net increase plastic bottle consumption, undermining the effects of a bottled water tax.

Originality/value

To the best of the authors’ knowledge, this study is the first to look at demand and tax aspects with regards to disaggregated bottled water products.

Keywords

Acknowledgements

The authors acknowledge partial funding provided by Texas A&M AgriLife Research for the initial stages of this project.

Citation

Zheng, W., Dharmasena, S., Capps Jr, O. and Janakiraman, R. (2018), "Consumer demand for and effects of tax on sparkling and non-sparkling bottled water in the United States", Journal of Agribusiness in Developing and Emerging Economies, Vol. 8 No. 3, pp. 501-517. https://doi.org/10.1108/JADEE-09-2017-0089

Publisher

:

Emerald Publishing Limited

Copyright © 2018, Emerald Publishing Limited